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Estimating New Zealand's Structural Budget Balance

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Abstract

Existing methodologies for estimating a government’s structural budget balance are reviewed and applied to the case of New Zealand. Besides the conventional cyclical adjustment, an assessment is made of other possible non-structural elements to the budgetary position, including the terms of trade, asset prices and unbalanced growth. A key result is that the terms-of-trade boom, which began in the late 2000s, is associated with around 1% of GDP in tax revenues that may not be structural. Uncertainty surrounding cyclically-adjusted balance estimates is presented using fan charts.

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  • Oscar Parkyn, 2010. "Estimating New Zealand's Structural Budget Balance," Treasury Working Paper Series 10/08, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:10/08
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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2010/10-08/twp10-08.pdf
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    References listed on IDEAS

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    1. Emmanuel De Veirman & Ashley Dunstan, 2008. "How do Housing Wealth, Financial Wealth and Consumption Interact? Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/05, Reserve Bank of New Zealand.
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    Cited by:

    1. Philip R. Lane, 2013. "External imbalances and macroeconomic policy," New Zealand Economic Papers, Taylor & Francis Journals, vol. 47(1), pages 53-70, April.
    2. Dhritidyuti Bose & Renee Philip & Richard Sullivan, 2016. "Returning to Surplus: New Zealand's Post-GFC Fiscal Consolidation Experience," Treasury Working Paper Series 16/05, New Zealand Treasury.
    3. Oscar Parkyn & Tugrul Vehbi, 2014. "The Effects of Fiscal Policy in New Zealand: Evidence from a VAR Model with Debt Constraints," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 345-364, September.
    4. Miles Workman, 2015. "Estimating the Cyclically- and Absorption-adjusted Fiscal Balance for New Zealand," Treasury Working Paper Series 15/09, New Zealand Treasury.
    5. Bruce White, 2013. "Macroeconomic Policy in New Zealand: From the Great Inflation to the Global Financial Crisis," Treasury Working Paper Series 13/30, New Zealand Treasury.
    6. Philip R. Lane, 2011. "External Imbalances and Macroeconomic Policy in New Zealand," The Institute for International Integration Studies Discussion Paper Series iiisdp376, IIIS.

    More about this item

    Keywords

    fiscal policy; business cycle; terms of trade; asset prices;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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